New Delhi: S&P Global Ratings has upgraded India’s long-term unsolicited sovereign credit rating to BBB from BBB-, citing robust economic growth, sustained fiscal consolidation, and policy stability. The short-term sovereign rating has also been raised to A-2 from A-3, while the transfer and convertibility assessment has been revised to A- from BBB+. The outlook on the long-term rating is stable.

"The upgrade of India reflects its buoyant economic growth, against the backdrop of an enhanced monetary policy environment that anchors inflationary expectations," the rating agency said. "Together with the government's commitment to fiscal consolidation and efforts to improve spending quality, we believe these factors have coalesced to benefit credit metrics."

The announcement lifted market sentiment, with the Indian rupee strengthening to 87.58 against the US dollar from 87.66, and the benchmark 10-year bond yield easing 7 basis points to 6.38 percent.

S&P said the ratings could face downward pressure if there is an erosion of political commitment to consolidate public finances or if economic growth slows materially in a way that undermines fiscal sustainability. It added that ratings could be further raised if fiscal deficits narrow meaningfully so that the net change in general government debt falls below 6 percent of GDP on a structural basis.

BI Bureau